3. Demand pull
Demand-pull inflation occurs when demand for a
good or service increases so much that it outstrips
supply.
As demand increases, sellers start selling out of the
product, and frustrate potential customers. Their next
step would be to produce more.
However, if supply is constrained, their next step
would be to raise prices, creating inflation. Therefore,
for an increase in demand to cause inflation, there
must be a supply constraint, otherwise supply would
simply rise to meet demand.
4. Example 1
In early 1970s, the Organization of Petroleum Exporting Counties (OPEC)
took steps to decrease global oil supply. During the period
there was no extraordinary increase in the volume of
consumption, but the prices still surged.
Example 2:
In 2012, severe floods hit the Punjab and Sind provinces of
Pakistan wiping away crops, shutting down refineries, killing
cattle and creating widespread disruption in supplies.
6. Black Money
The money which is earned through an
illegal way.
Corruption and black money leads
to increase in aggregate demand,
which is cause of inflation.
These evils increase aggregate
demand and import volume.
The money which is earned through
an illegal way.
7.
8. Disposable Income
i
the money a person has available to spend
after paying taxes, pension contributions, etc
the total amount of money that the individ
uals in a community, country, etc, have availa
ble to buy consumer goods
9.
10. Non-productive Expenditures
Government of Pakistan has to make a lot of non-
productive expenditures like defence etc. Such
unproductive expenditures lead to the wastage of
economy’s precious resources and also lead to
inflation.
11. Cost-push Inflation
Cost-push inflation is when a shortage of
supply of labor, raw materials or
capital drives up prices. The demand remains
the same, but since there are fewer goods or
services, the supplier can charge more per
unit.
12. Example 1:
if the storm destroy the generators, it’s demand
will increases in the market for a limited time until free
market had an opportunity to work more generators
would be shipped in from other areas and prices would
return to normal.
Example 2:
In the aftermath of the 2008 financial crisis, there
was inflation in two asset classes, gold and oil prices,
with deflation in two others -- housing prices and
personal income.
Example 1:
if the storm destroy the generators, it’s demand
will increases in the market for a limited time
until free market had an opportunity to work more
generators would be shipped in from other areas and
prices would return to normal.
Example 2:
In the aftermath of the 2008 financial crisis,
there was inflation in two asset classes, gold and oil
prices, with deflation in two others -- housing prices
and personal income.
14. Wages
Wages are one of the main costs
facing firms. Rising wages will
push up prices as firms have to
pay higher costs (higher wages
may also cause rising demand)
17. Taxes
What is Tax?
The profit which government gain from the
people.
It may be from the cash you earn or the product
you buy.
You have to pay to your government for the
facilities you are getting
18. Types of Taxes In Pakistan
Direct Taxes
>Salaries
>Interest on securities;
>Income from property;
>Income from business
>Capital gains
>Income from other sources
Personal Tax
>rates rending from 10 to 35 per cent.
Tax on Companies
>Sale tax
>Income tax
19. Raw material
As the prices of raw material inreases the price of
product depending on them increases and this
cause the inflation in the society.
Similarly in 2005-2008 the prices of oil increases
which increases the inflation in the society as it
effect on different fields.
20.
21. Profit Margin
The profit margin is an accounting measure
designed to gauge the financial health of a
business or industry
it is defined as the ratio of profits earned to total
sales receipts (or costs) over some defined period
22.
23.
24. Greedy people of society wants
more and more money.
They don’t care for the people and
their needs.
They earn from the needs of people
25. Expansion of the
Money Supply
The money supply is not just cash, but also
credit, loans and mortgages.
When loans are cheap, then there will
be too much money chasing too few goods,
creating inflation. The prices of just about
everything will increase, even though neither
demand nor supply has changed.
